Class Actions

• Publication year: 2013

Class Actions

Thomas M. Byrne

Stacey McGavin Mohr

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Class Actions

by Thomas M. Byrne^* and Stacey McGavin Mohr^**

This year saw the United States Court of Appeals for the Eleventh Circuit set the ground rules for collateral attacks on class settlements and elaborate on the predominance requirements for class certification.¹ The court also considered the enforceability of a variety of arbitration provisions in light of the United States Supreme Court's decision in AT&T Mobility LLC v. Concepcion² and examined standing issues common in data security breach class actions.

I. COLLATERAL ATTACK ON A LIMITED FUND SETTLEMENT

In Juris v. Inamed Corp.,³ the Eleventh Circuit considered several issues related to the ability of an absent class member to collaterally attack a "limited fund" class settlement. In 1999, the United States District Court for the Northern District of Alabama had approved a mandatory, limited fund class settlement under Federal Rule of Civil Procedure 23(b)(1)(B)⁴ resolving thousands of claims arising from injuries allegedly caused by defective silicone breast implants manufactured

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by Inamed.⁵ The settlement fund was conditioned on the inclusion of an anti-suit injunction that encompassed not only current injury claims but also any claims based on future injuries. In 2006, after discovering she had been injured by the allegedly defective implants, Zuzanna Juris filed an individual action in California state court against Inamed and its successor. The defendants filed a demurrer in the California court on res judicata grounds, to which Juris responded that the application of res judicata would deprive her of due process. The defendants then filed a motion in the Alabama district court requesting that Juris and her attorney show cause why they could not be held in contempt for violating the anti-suit injunction, and the parties jointly requested that the California action be stayed pending a decision from the Alabama district court.⁶ Rejecting Juris's many arguments—based on the application of Rule 23(b)(1)(B), due process, and the Anti-Injunction Act⁷ —the district court ruled that the class settlement and anti-suit injunction precluded the California action under the doctrine of res judicata and denied Juris's due process challenge.⁸

The Eleventh Circuit affirmed in a lengthy opinion addressing several aspects of the limited fund class action, the res judicata effect of prior settlements, and due process. The court first concluded that Juris could collaterally attack the res judicata effect of the settlement, but that she must show that application of res judicata would be inconsistent with due process.⁹ Specifically, she would have to show that the prior proceeding lacked adequate representation or notice or that the absence of opt-out rights amounted to a denial of due process.¹⁰ The court left open the question of whether such collateral review must be limited to preclude Juris from raising arguments already raised and rejected in the class action court, ultimately concluding that, even considering these arguments, Juris could not show a violation of due process.¹¹

Before proceeding to the due process arguments, the court addressed Juris's contention that the California state court, rather than the Alabama district court, was the proper forum for her collateral attack.¹² The court ultimately dismissed this argument on the basis that Juris had herself consented to jurisdiction by filing a joint motion staying the

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California action and also had abandoned the argument by not raising it below.¹³ First, however, the court discussed at some length the implications of a decision from the United States Court of Appeals for the Third Circuit, In re Real Estate Title & Settlement Services Antitrust Litigation,¹⁴ which held that if an absent class member has not been given the opportunity to opt out in a class action involving injunctive relief and damages claims, the member could not be "haled across the country" but must either have minimum contacts with the forum or consent to jurisdiction in order to be enjoined by the district court that entertained the class action.¹⁵ Real Estate, however, did not involve a limited fund settlement, and the Third Circuit had specifically stated that it was not addressing the due process requirements in a limited fund class action.¹⁶ And because Juris had consented to jurisdiction, the Eleventh Circuit did not address the issue left open in Real Estate: "[W]hether, in the absence of her express consent to jurisdiction, it would have run afoul of the due process clause to require Juris to litigate her collateral attack on the limited fund settlement in the certifying court."¹⁷

Turning to the merits of Juris's due process argument, the court considered in sequence her three possible bases: notice, representation, and lack of opt-out rights.¹⁸ As to notice, the court rejected Juris's argument that she was entitled to actual, individual notice of the proposed settlement, focusing instead on whether the notice was sufficient to produce a hearing that was adversarial in nature.¹⁹ Although Rule 23 does not require notice for 23(b)(1) classes, the Eleventh Circuit had previously held in In re Temple²⁰ that due process will require some notice beyond adequate representation in a 23(b)(1)(B) class action, given its mandatory nature.²¹ In Temple, however, no

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notice had been provided, making it essentially an ex parte proceeding.²² Temple therefore does not require actual, individual notice, just enough notice to prevent the certification proceeding from being essentially non-adversarial: "Where the notice afforded reaches a critical mass of putative class members, such that the facts underlying certification are contested and approached in a sufficiently adversarial manner, the due process pitfall identified in Temple can be avoided."²³ Here, the court directed the distribution of individual notices to tens of thousands of claimants, and notices were published in multiple national publications. Moreover, class members who had no manifest injury were at the hearing and represented Juris's interests, making the proceeding "sufficiently adversarial."²⁴ Indeed, Juris could think of no objection that she would have raised that was not actually raised by objectors at the hearing.²⁵ The court therefore refused to hold that actual, individual notice is necessary for a 23(b)(1)(B) class.²⁶

The court similarly rejected Juris's argument that her interests were not adequately represented during the certification proceedings, again pointing out their adversarial nature.²⁷ Juris argued that the Supreme Court's decisions in Amchem Products, Inc. v. Windsor²⁸ and Ortiz v. Fibreboard Corp.,²⁹ both of which involved plaintiffs claiming asbestos-related injuries, required the creation of two distinct subclasses—one composed of plaintiffs with current injuries and one for plaintiffs with only potential, future injuries—with separate class representatives for each.³⁰ In Amchem, the Court had reversed the grant of class certification based on failure to meet Rule 23(a)(4)'s³¹ adequate representation requirement.³² There, the "'sprawling class' included not only presently injured [plaintiffs], but also those who had only been exposed to asbestos" but had no manifest injury, so that the interests of the currently injured in having immediate payment cut directly against those of the potentially injured in having an ample fund for the future.³³ The Court subsequently held in Ortiz that this same principle

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of Rule 23(a)(4) was applicable to consideration of the propriety of certification of a limited fund class under Rule 23(b)(1)(B).³⁴ The Eleventh Circuit clarified, however, that Amchem and Ortiz simply require that there be structural assurances of adequate representation to protect against conflicting goals: "[P]rotections must ensure that class representatives understand that their role is representing solely members of their respective constituency, not the whole class."³⁵ But such protections need not necessarily be in the form of formal subclasses. Amchem and Ortiz, moreover, involved a direct appeal of a Rule 23 certification, not a collateral attack, and the Eleventh Circuit refused to go so far as to hold that due process requires formal subclasses.³⁶ Again, the procedures in Juris adequately protected against antagonistic alignment within the class: the named plaintiffs had a range of injuries, from current to potential, and separate counsel was brought in to represent the future injury plaintiffs.³⁷

The court likewise concluded that due process did not require that Juris be given opt-out rights.³⁸ Juris's argument was based primarily on her lack of contacts with Alabama, which she claimed had deprived the court of personal jurisdiction,³⁹ giving her a constitutional right to opt out under the Supreme Court's decision in Phillips Petroleum Co. v. Shutts.⁴⁰ Shutts, which involved a money damages class, held that the class action court properly exercised personal jurisdiction over absent class members because certain procedural protections, such as opt-out rights, were present.⁴¹ Shutts, however, would not apply where an independent basis for personal jurisdiction exists, such as in a limited fund class action, where the presence of the res in the district of the forum court provides such jurisdiction.⁴² Here, the limited recovery fund had been deposited in a settlement account in Alabama, giving the Alabama district court jurisdiction.⁴³ Noting that it was not fairly raised on appeal, the court declined to address the broader argument of whether opt-out rights are required even where personal jurisdiction exists.⁴⁴

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Having concluded that Juris was not deprived of due process, the court dispensed with her argument that certification of the class had not met the requirements of Rule 23, concluding that the district court...